What no one seems to have noticed yet is the Smith & Nephew has already been through a DPA, with a monitor, for similar conduct. In a 2007 civil settlement, Smith & Nephew agreed to pay $28.9 million among other undertakings to resolve charges under the Anti-Kickback statute and the False Claims Act. Smith & Nephew emerged from the DPA in 2009. The case was brought by the US Attorney’s Office for the District of New Jersey (Chris Christie, then US Attorney, is now the Governor of New Jersey).

By the way, Smith & Nephew’s US headquarters is in Memphis, TN. My home town, go Owls!

The current action revolves around giving kickbacks to surgeons—filtered through a Greek distributor—to use S&N products. By the way, my favorite part of those allegations is when S&N bought another company in that market, and was going to replace their bribe-paying distributor in favor of their new subsidiary. The bribe-paying distributor argued to keep the relationship, saying that the new subsidiary also paid bribes to surgeons, and at higher rates than they were paying!

The recent case seems to cover a time period from 1997-2007. The older case seems to deal with that time period as well.

The allegations as outlined in the civil settlement—as sparse as the factual allegations were—include bribing surgeons to use S&N products. The payments were camouflaged as fee-for-service contracts, fixed fee contracts, and product development contracts. S&N denied the allegations, but agreed to settle the civil action in order “to avoid the delay, uncertainty, inconvenience, and expense of protracted litigation….”

S&N agreed to several terms:

$28.9 million payment

Continued enhancement of its compliance program

a monitor

So here’s my question: did the DOJ know about the prior DPA? Does this make S&N a recidivist? After all, it’s a prior DPA, but it covers the same time period, and the same conduct (although these surgeons were domestic). I didn’t see anything in the DOJ press release about the prior DPA, although I haven’t found the DPA yet. There’s no mention of the prior DPA in the SEC’s complaint. I’ve reached out to the DOJ for comment, and will update if I hear anything.

UPDATE: 2:00pm, Feb 7:

Some additional random thoughts on the Smith & Nephew case.

In environmental law, there’s a concept of the “responsible corporate officer.” A truly knowledge-free way to get prosecuted. I remember in law school we nicknamed the RCO the “Vice President for Incarceration.” I think we should start calling any Vice President for International Sales the Vice President for Incarceration.

Greece is not a low-risk country. One of my first major issues happened because of something in Greece.

The emails in the more recent case were really bad, and included outright statements that bribes were going to be paid. In-house counsel knew, and took notes—by the way, those notes were mentioned in the SEC’s complaint, did S&N waive privilege?

This is how “industry sweeps” get started. Did anyone else notice the line in the SEC’s complaint about how the crooked distributor’s pass-through company “was also used by another medical device company to pay bribes to public doctors in Greece?” Or was S&N found via that other company’s self-disclosure?

Would this be a better case than the O’Shea case to make a factual argument about how doctors in public hospitals are not public officials? Not to get political, but does the health care debate impact that discussion? Is health care a public function?

S&N is a UK company: will the SFO act here also?

Once again, we see the primary place that ensuring that any payment you make is for actual value plays in FCPA compliance. If you get that right, you will avoid 90% of your risk. Maybe more than 90%